Despite an uptick in profits and client assets, LPL Financial reported flat revenues for the second quarter that missed analysts’ expectations due to slower sales commissions and ongoing regulatory compliance issues.
“As we have seen in similar periods the past, uncertainty in the market dampened our second quarter sales volumes across mutual funds, variable annuities and alternative investments,” CEO Mark Casady said in an earnings call Wednesday.
“We expect continued softness in sales commissions in the third quarter due to the same factors,” he added.
In terms of the firm’s recent regulatory fines and cases, Casady said the firm is close to a resolving the issues around LPL’s compliance processes. The firm spent $6.7 million last quarter on regulatory-related matters. But for second half of 2015, Casady warned there are “other significant announcements to come shortly.”
Here are the highlights from the quarter:
- Net revenues for the quarter was flat at $1.09 billion, compared to the the $1.092 billion reported a year earlier. But it missed analysts’ expectations by about $10 million, according to Seeking Alpha.
- Net income rose to $50.2 million from $43.1 million a year earlier
- LPL’s second quarter earnings per share of $0.65 beat analysts’ expectations by $0.01, growing by $0.04 year-over-year.
- And yet advisory and brokerage assets grew 4 percent year-over-year to $486 billion. Advisory assets grew 11.7 percent over the past year to hit $186.8 billion in the second quarter.
- LPL reported a strong showing in its hybrid RIA business, with assets growing there over 35 percent to $111.6 billion, representing 359 hybrid RIAs, compared to $81.8 billion and 282 hybrid RIAs reported a year earlier.
- Net new advisory assets reached a record $18 billion over the past 12 months.
- The firm gained 32 net new advisors in the second quarter, bringing the headcount to 14,130. Casady said the firm lost 50 low-producing advisors this quarter who had less than $20,000 in production each. He added the recruiting numbers were “exactly where we expect them to be.”